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You are right, the two words are related, sort of.
"Faggot" derives from the Latin word fagus, or "beech tree." Beeches were sacred to Jupiter, and there was a highly respected school of priests who would sit in beech groves and derive oracles from the sound of the wind in the leaves. Like all Roman priesthoods, they were bound by very strict taboos; this priesthood had to abstain from sex with any female while serving as an oracle. Because such a rule was less onerous to someone with little interest in women, it is believed that this priesthood attracted many homosexual men. Fagus was used in early Christian polemics to denounce the perceived immorality of paganism; as challengers to Christian dominance died off, it came to be used specifically against gay men. It is interesting to note that charges of "sodomy" were leveled by the Inquisition against male witches (there were more than a few), the charge was often based on nothing more than the presence of beech trees near the accused's home, or amulets or other "magical" items made from the wood of the beech tree. And of course, since the Inquisition records were kept in Latin, the word fagus was used. (Information from Another Mother Tongue by Judy Grahn, Witchcraft and the Gay Counterculture by Arthur Evans, and other sources.)
"Fascist" is a modern Italian form of earlier Latin fagotto (I think I have the form right), literally meaning "little beech" and used to describe a beech twig. A bundle of beech twigs tied together was called a fascis, Latin for "bundle"; such bundles were frequently used to represent the god Jupiter. Early in the Roman Empire, the fasces (note the slightly different spelling) became a symbol of the state's power, with government officials having the right to carry them in formal processions. Outside the traditional boundaries of the city of Rome, fasces included an axe, indicating that the magistrate had the power to decide life or death cases; within Rome, the axe was removed except for those used by the Emperor. (No cites, just stuff I've picked up.)
From fagotto, through Middle French fagot (bundle of sticks), we get the English word "faggot" to mean a bundle of sticks and latter, a bundle used specifically as kindling (which is where British English gets "fag" to mean a cigarette, ie a smoldering twig of tobacco.) The combining of "bundle of sticks" and "homosexual" into the same word appears around the middle of the 15th century, rejoining two different meanings of the same original word.
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